Which savings accounts consistently offer the best interest rates?

Back in vogue

After a long hiatus, savings accounts and term deposits have come back into fashion. Many Millennials and Gen Z are opening their first-ever savings accounts, lured by the highest interest rates we have seen in 10 years.

The interest rate that consumers receive for their deposits constantly changes, especially with the recent increases to the cash rate. Choosing an account with an ongoing high rate can mean reaching your financial goals quicker - whether that be saving for a house, holiday or handbag.

In this article we'll look back over the past year to break down the savings accounts with the best ongoing rates along with some personal considerations to help you find a savings account that fits your needs. You'll notice I mentioned "ongoing rate", this is important.

Who's missing out and what are they missing out on?

Consumers often miss some of their potential earnings due to tricky introduction periods, where banks offer you a great rate for the first few months, then quietly switch you on to a much lower rate after the period is up. For this reason, we'll only look at accounts with the highest ongoing rates. This removes a level of complexity, making my life and your life easier.

Our research found that 20% of Australians have missed out on their bonus savings rate and a further 33% don't have an account that offers a bonus savings rate. That's over 1 in 2 Australians who are missing out on some easy extra dollars. On an average savings balance of $30,218 and an average monthly deposit of $635, this is over $2,800 in interest foregone over a two-year period.

In light of this revelation, we've pulled the data to find out which savings accounts are consistently offering top rates, and what you have to do to get them.

The best savings rates

The ING Savings Maximiser account has offered the top rate across most months in the last year with a strong run at the top from September through to March. Vrigin's boost saver, available to those over 25, consistently offered the second-highest rates on the market and was even the market leader over a few months. Whilst past performance isn't an indicator of future performance, it is likely these accounts will continue to offer some of the best rates on the market… with a caveat of course.

To access these stellar rates, you have to meet certain requirements. High-interest accounts generally consist of two rates — base rates and bonus rates. You'll receive a base rate as long as you have money in your account. These are usually low, as low as 0.05% for some accounts. To access the higher bonus rate you usually need to complete actions on a monthly basis such as depositing a certain amount or maintaining a certain balance. If you don't meet these specific requirements, you'll be stuck with a piddly base rate for that month.

This may sound like a lot of work (it isn't), but I'll be straight up — to truly make your money work while you sleep, you too, have to put in a little bit of work.

For convenience, I did it myself and timed it. So now you know that for 5 minutes of work every month, you can save yourself an extra $1,500 over a year.

How to maximise your savings

Before we get started you'll need a few tools:

Identification documents: to verify your identity, most banks will require two separate forms of ID. This could be a driver's licence, passport, Medicare card or birth certificate.

Personal details: In addition to the basics — your name and date of birth — you will need to supply an Australian residential address and telephone number.

Tax File Number (TFN): Although not mandatory, if you do not supply the bank with your TFN, you'll be taxed at the highest marginal rate on your interest earnings.

Prep (50 mins) (One-off)
Set up an account with the top 5 providers that I listed above - it should take roughly 10 minutes for each provider.

Ongoing (5 mins) (Once a month)
Set a reminder on the first of every month
Check which accounts have the highest rate on Finder's savings rate page
Check that you can meet the requirements to unlock the bonus rate
Move your money into the account with the best rate

Additional step (5 mins) (Once a month)
Set another reminder a few days before the end of each month
Check that you have reached the requirements to unlock the bonus interest
If you haven't, it may just be a matter of using the card linked to your account for the next 5 transactions or topping up your balance. Well worth the extra interest as you'll see below

Don't forget about the base rate

Now let's say you don't hit all your requirements for a bonus rate. Maybe you're on holidays, or just lose track of time like I do frequently. This is expected, and having a savings account with a high base rate can be helpful for this scenario.

The average Australian has $30,218 in savings and deposits $635 every month. On the lowest base rate of 0.05%, you would receive just $17 of interest over a year or $62 over three years. Comparing this to Rabobank's base rate of 3% which will snag you a whopping $1,025 over 1 year and $3,871 over 3 years makes it clear why base rates are an important consideration.

With inter-bank transfers of 1 to 3 business days largely extinct thanks to the New Payments Platform (NPP), gone is the "I don't have enough time" excuse. When coupled with PayID and Osko, transferring between accounts and maximising your savings is one of the only times the bank will say "just a sec" and it will actually take just one second.